Elder law promises to be growing field
for one simple reason: demographics. Currently, there are 40+ million Americans over the age of 65, or about 13% of the
population. In the next thirty years, as the baby boomers age, this
number is expected to double to over 80 million -- fully
one in five Americans will be part of the over 65 crowd.

Many of the elderly face extreme
financial pressures. Social Security, which was never designed to
provide financial security to retirees, is heavily relied upon by a large
number of seniors. Roughly ten percent of American senior citizens live
in poverty; without Social Security, it would be nearly half.
For a third of the elderly, Social Security is virtually their only income.
This financial dependence, the growing senior population, and the instability
(perceived or actual) of the Social Security system, is certain to create
many issues for the elderly in the next several decades.

Elder law encompasses a wide range of topics,
from retirement (financial) planning to long-term healthcare. Probably
the most common issue facing seniors (and their families) is how to protect
against the cost of extended long-term care. Often, this type of
planning involves the use of governmental assistance programs such as Medicare
and Medicaid. These programs are complex, and understanding these
complexities can make an enormous difference in a family's finances.
A related issue is long-term healthcare insurance. This type of insurance
can help reduce the impact of an extended nursing home stay where governmental
assistance is not available.

Medicare

Governmental healthcare assistance for senior
citizens is divided into two programs: Medicare, which is the first
"safety net," and Medicaid (discussed below). Unlike Medicaid,
Medicare has no income or asset eligibility standards -- if you are 65
or older, and are receiving social security, you are covered by Medicare.

Medicare is divided into four parts: Part
A Hospital Insurance, Part B Supplemental Medical Insurance, Part C Private Insurance, and Part D Presciption
Drug Coverage.

Medicaid

Medicaid is administered jointly
by the state and federal governments. As long a certain federal minimums
are met, each state can tailor its Medicaid program to meet particular
goals. It is a "needs based" program, which means that is it
generally not available to individuals who have income or assets
above prescribed limits.

In Vermont, Medicaid is not available
to all needy persons; rather, it covers categories of needy individuals,
including individuals over sixty-five or who are blind or disabled.
Assuming you meet all of the eligibility requirements, Medicaid covers
all medical care including hospitalization, doctor bills, nursing home
coverage, home care, and prescriptions.

Transfer
of Resources RulesGiven the severe Medicaid limitations on
resources, you might consider the transfer of assets to your heirs as a method
of meeting the resource test discussed above. This type of Medicaid
planning is often ineffective. Under current rules, Vermont will look back
at all transfers made in the last 60 months. If you make any
such transfers, you will be ineligible for Medicaid for a period of time
which is calculated by dividing value of the transferred resources by the
average cost of a nursing facility in your area.

Some transfers are exempt. You can transfer
property to your spouse without a Medicaid penalty. You can also transfer
property to a child if the child is under 21 years of age or is blind or
disabled.

These rules are extremely
complex, and you should consult an attorney prior to engaging in any Medicaid
planning.

Long-Term
Healthcare (Nursing Home) Insurance

Long term healthcare insurance is often sold to
relieve the fear and risk associated with the costs of nursing home care.
This type of insurance may have a proper place in your retirement planning;
however, there are several traps for the unwary.

The major consideration in buying a long term
healthcare insurance policy is not cost. The key consideration
is the triggering event(s) for coverage under the policy; that is, when
will the policy pay you a benefit? Payment under almost all long
term healthcare insurance policies is triggered by your inability to perform
one or more "activities of daily living" or "ADL's." These
normally include bathing, dressing, walking, moving from bed to chair,
toileting, maintaining continence, and eating. If the insurance policy
requires you to be unable to perform multiple ADL's, it is unlikely
you will receive benefits from the policy, regardless of how low the premiums
are.

ADL's are not the same from one insurance company
to another. Most insurance policies define what is meant by an inability
to perform a particular ADL such as bathing or dressing. For example,
a definition that requires physical assistance in performing the ADL is
more restrictive than one that merely calls for supervision.

Some policies do not evaluate mental functions
to determine the qualifications for benefits. This is important for sufferers
of Alzheimer's disease. A policyholder who has the disease can be
denied benefits if he or she is physically able to perform the ADL's
specified in the policy. Thus, an insured with Alzheimer's disease
may not qualify even he or she is forgetting to take medications or turn
off the stove.

The old adage, "you get what you pay for," is
certainly apt. Prior to purchasing any long-term health care insurance
policy, read and understand the triggering event(s) for coverage.
Only then can you compare the cost and benefits of competing policies.

Medigap InsuranceMedigap or supplemental Medicare insurance policies
are now offered under set federal guidelines. These policies are
designed to fill in the gaps where coverage fails under medicare deductibles
and limits.

Retirement
(Financial) Planning

For most clients, the major question as they approach
their senior years is whether they have sufficient assets to retire.
The answer to this question depends on many factors:

Although the interaction of these factors is complex,
the approach is fairly simple. Pre-retirement can be viewed as a
wealth building stage, where you are saving assets to fund retirement.
Post-retirement is the wealth consumption phase where you use income and
assets to maintain your lifestyle until death. By making certain
assumptions, you can project how much wealth you will accumulate during
the first phase and how long that wealth will last during the second phase.
If it will last until (at least) the end of your life expectancy, then
you will have met your retirement goals.

Phase One - Wealth BuildingIn order to determine what assets you will have
available to fuel your post-retirement lifestyle, you need to make several
assumptions. First, you need to determine how much you are saving,
annually, towards retirement. This includes regular savings and investment
accounts, 401(k) and IRA accounts, and the growth in other pension plans.
To determine your rate of savings, you can look at past years to get a
sense of what percentage of earnings is actually added to your overall
wealth. Alternatively, you could add up all of your expenses, including
living expenses, taxes, etc., and subtract them from earnings to arrive
at savings. Either way, the idea is to capture the amount you can
add to the pot of wealth available when you retire.

Second, you need to select a rate of return on
your assets, and project the total growth between now and the date of retirement.
Obviously, the higher the rate of return, the more you will project to
have at retirement. The key is to be realistic - if you are investing
conservatively (CD's, money markets, cash) do not choose a rate of return
which is higher. If you are investing in the stock market, choose
a rate of return which reflects those investments (historically 9-10% annually).

If you make assumptions which are accurate, you
should be able to put together a projection which arrives at the "pot"
of wealth available to fuel your retirement.

Phase Two - Wealth ConsumptionNow that you know how much wealth you can accumulate
prior to retirement, you need to determine how long that wealth will last.
You first need to estimate your post-retirement personal living expenses.
These expenses should include any extraordinary goals you might have, such
as travel or buying a motorhome. Next, you need to calculate your
sources of income. These would include social security, income from
investment assets, and pension income. To the extent your expenses
exceed your income, you will need to consume assets to fuel your lifestyle.
By comparing income and assets for each year following retirement, it is
possible to project how long your wealth will last. In a conservative
financial plan, you will want your wealth to last at least as long as your
life expectancy (and if married, the life expectancy of your spouse).

Creating a retirement plan is a complicated task,
which requires consideration of many factors and often a good deal of number
crunching. You should consider consulting a professional before making
financial decisions which will affect your retirement.

Estate Planning

Estate planning for most seniors involves three
major concerns: protecting the financial well-being of the surviving
spouse, ensuring the desired distribution of assets to heirs, and reducing
or eliminating estate taxes.

These concerns can all be addressed through the
use of a trust. A trust can be used to protect your spouse, while
maintaining flexibility. If needed, the trustee can assist your spouse
with asset management. Upon the death of your spouse, the trust will
direct the distribution of your assets to your heirs according to your
wishes. If the trust is structured properly, it can help reduce or
eliminate estate taxation. For more information regarding trusts,
visit the Living (Revocable)
Trusts webpage.

Another objective of many seniors
is to assist their children and grandchildren with their financial goals,
such as buying a home, starting a business, or funding education.
This objective can be accomplished through the use of lifetime gifts, which
are fully discussed at the Lifetime
Gifts webpage.